558 B.R. 299
8th Cir. BAP2016Background
- Debtor Paul Hansmeier filed a Chapter 13 petition; the U.S. Trustee moved to convert the case to Chapter 7 under 11 U.S.C. § 1307(c). The Trustee’s motion was verified.
- Hansmeier filed an unverified objection without an affidavit and did not identify proposed witnesses or submit evidentiary materials as required by local rules.
- At the hearing no additional evidence was offered; the bankruptcy court ruled from the bench and ordered conversion to Chapter 7. Hansmeier appealed.
- The bankruptcy court’s factual findings (drawn from the Trustee’s verified motion) included multiple instances of nondisclosure, inconsistent testimony, transfer omissions, fraud findings by other courts, and pending disciplinary proceedings.
- The bankruptcy court concluded Hansmeier’s petition was filed in bad faith and that cause existed to convert to Chapter 7; the district BAP affirmed for abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debtor was entitled to an evidentiary hearing under Fed. R. Bankr. P. 9014(d) | Hansmeier: Rule 9014(d) required live testimony because material facts were disputed. | U.S. Trustee: No disputed material facts in admissible form; debtor never requested or supported an evidentiary hearing. | No. Debtor waived the issue by failing to request or support an evidentiary hearing; Rule 9014(d) applies only when adjudication requires resolving disputed material facts. |
| Whether debtor’s unverified objection sufficed to create a factual dispute | Hansmeier: Objection raised disputes about the Trustee’s factual assertions. | U.S. Trustee: Objection was unverified and unsupported; court may rely on verified motion. | The unverified objection was insufficient — the court properly relied on the Trustee’s verified motion. |
| Whether a proposed “100% plan” proved good faith and barred conversion | Hansmeier: A confirmable 100% plan showed good faith and would prevent conversion. | U.S. Trustee: Debtor offered no admissible evidence that the plan was confirmable; other evidence showed bad faith. | Rejected. A merely asserted or unproven plan does not overcome other evidence of bad faith. |
| Whether the bankruptcy court abused its discretion in converting under § 1307(c) | Hansmeier: Conversion was improper given his plan and need for evidentiary hearing. | U.S. Trustee: Multiple independent grounds (nondisclosure, fraud findings, asset transfers, disciplinary risks) supported conversion for cause. | No abuse of discretion. The totality of circumstances supported conversion for cause (bad faith filing, inaccurate disclosures, misleading representations, manipulation). |
Key Cases Cited
- City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 702 F.3d 1147 (8th Cir. 2013) (standards for abuse of discretion review)
- Molitor v. Eidson (In re Molitor), 76 F.3d 218 (8th Cir. 1996) (bad-faith Chapter 13 filings may be converted or dismissed; factors to evaluate good faith)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (nonmoving party must produce admissible evidence to defeat motion when record supports moving party)
- Residential Funding Co. v. Terrace Mortg. Co., 725 F.3d 910 (8th Cir. 2013) (summary-judgment-style principles applied when moving party meets its evidentiary burden)
- Paulson v. Wein (In re Paulson), 477 B.R. 740 (8th Cir. BAP 2012) (abuse of discretion standard applied to conversion/dismissal under § 1307(c))